Asked by sangeetha ajith on Jul 04, 2024
Verified
What is the purpose of a lockbox plan?
A) It is used for safekeeping cash and marketable securities.
B) It is used to identify inventory safety stocks.
C) It is used to slow down the collection of cheques a firm writes.
D) It is used to speed up the collection of cheques received.
Lockbox Plan
A banking service that speeds up collection and processing of company receipts by having those payments mailed directly to a location accessible by the bank.
Collection Of Cheques
Collection of Cheques refers to the process banks undertake to collect the amount specified on a cheque from the bank upon which the cheque is drawn.
- Gain insight into the core concepts of cash management and the positive aspects of utilizing a lockbox system.
Verified Answer
SS
Sadaf SediqiJul 11, 2024
Final Answer :
D
Explanation :
The purpose of a lockbox plan is to speed up the collection of cheques received. This is achieved by having the cheques being deposited directly into the company's bank account through a lockbox service, instead of waiting for the physical cheques to be received and deposited manually. This reduces the processing time and improves cash flow management.
Learning Objectives
- Gain insight into the core concepts of cash management and the positive aspects of utilizing a lockbox system.